Monthly Archives: May 2015

Oppenheimer: Cuba: Very big fuss over very small economy

President Barack Obama’s historic normalization talks with Cuba have brought about a lot of excitement in business circles, and hardly a day goes by without new reports of U.S. investors, lawyers and entrepreneurs flocking to the island. But I’m afraid most of them will lose their shirts there.
A dispassionate look at Cuba’s reality shows that, despite all the hoopla about last week’s U.S. removal of Cuba from its list of terrorist nations, which opened the way for re-establishment of full diplomatic relations between the two countries and international loans, Cuba remains one of the most backward countries in Latin America. And it will take many years to get its economy back to life.
Yes, Obama’s opening to Cuba is by an large a good idea. And, granted, there will be opportunities in the tourism industry to build new hotels. But the scope of these business opportunities will be much more limited than the Obama administration — eager for a foreign policy legacy-setting victory in the aftermath of its Middle East failures — is leading us to believe.
Consider the facts:
First, Cuba’s gross national income per capita, although nearly impossible to measure because the island does not measure its economy by international standards, is estimated by the World Bank at $5,800 a year. That’s almost three times less than Chile’s per capita income of more than $15,000 a year, and way below Latin America’s average of $9,500 a year, according to World Bank figures.
Cuba’s average wage is of about $20 a month (yes, you read right, a month.) That will make it very hard for average Cubans to buy more imported goods, wherever they come from.
Second, Cuba’s 11 million population has an average age of about 40, one of the oldest in Latin America, because of few births and massive migration. That will make it hard for Cuba to become a magnet for investments in factories or outsourcing services.
While other Latin American countries will benefit from young populations in coming years, Cuba’s demographic scene is likely to worsen.
In a recent report entitled “Big fuss, small market,” John Price, managing director of the Americas Market Intelligence consulting firm in Miami, argued that “if East Germany is any guide to what may happen next in Cuba, an additional two million Cubans would leave the island within five years of an end to travel restrictions.”
He added, “Most of those anxious to leave will be the best educated working-age adults who can pursue higher wages and better opportunities abroad. Cuba will become a nation of elderly, with limited growth prospects.”
Third, despite Obama’s executive orders to open up tourism and some investments to Cuba, only the U.S. Congress can lift the full U.S. commercial embargo on the island, and that’s not likely to happen anytime soon.
Even if some Republican legislators from mid-Western farm states support lifting the U.S. embargo, the prevailing mood within Republicans in Congress will be to deny Obama a vote that would allow him to set a foreign policy legacy as the U.S. president who “opened up” Cuba, much like Nixon “opened up” China.
“I don’t see the U.S. embargo lifted while Obama is in office,” Price told me.”I doubt that anything will happen within the next two or three years.”
Fourth, despite a big influx of dollars from U.S. tourism and family remittances, Cuba is threatened with a worsening economic crisis if Venezuela can’t keep up with its oil subsidies to the island. That may delay Cuba’s economic resurgence further.
Fifth, Cuba lacks and independent judiciary to protect investors’ rights, as so many Spanish and Canadian business people have learned the hard way. And that’s not likely to change anytime soon.
In a recent interview, U.S. Secretary of Commerce Penny Pritzker told me that even though Cuba is a small economy, the Cuban people are entrepreneurial , and have a great economic potential. “It’s a beginning, you have to start. And by starting, things will evolve,” she said.
My opinion: Maybe so. But for the time being, as Florida International University business professor Jerry Haar has rightly — and only half-jokingly — commented, the most profitable businesses dealing with Cuba will be those that put together conferences and seminars on doing business in Cuba.
Obama did the right thing in starting normalization talks with Cuba’s military dictatorship, although he should be much more forthright in demanding basic freedoms on the island. But the administration should tone down its claims that the U.S.-Cuba honeymoon will lead to political and economic changes on the island, and to great business opportunities for foreign companies. It won’t, at least in the near future. The Miami Herald

Venezuela’s Opposition Supporters Protest Government

Thousands march to back a jailed opposition leader, who has gone on a hunger strike.
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Tens of thousands of antigovernment protesters marched in this politically divided country Saturday to back a jailed opposition leader, who has gone on a hunger strike to pressure President Nicolas Maduro to hold congressional elections and free prisoners allegedly detained for political motives.
Gatherings were reported across Venezuela, with large turnouts in the major cities of Maracaibo, Valencia and Barquisimeto as well in Caracas, in some of the largest protests since government opponents roiled the oil-rich country last year for several bloody, chaotic weeks.
Leopoldo Lopez, a distant descendant of Venezuela’s founding father, Simon Bolivar, has been in prison 15 months for backing protests last year that resulted in 43 deaths after a crackdown by state security forces and militant government supporters.
Mr. Maduro says that 44-year-old former mayor tried to topple the government by stirring widespread unrest. In a twitter post on Friday, he said Mr. Lopez’s followers were attempting the same with these new marches. “The unpatriotic right wing continues on the path of shortcuts and violence, we triumph with the #heartofthefatherland,” he wrote.
Mr. Lopez maintains the charges against him are a trumped-up excuse to add him to a growing number of political prisoners. His trial is ongoing. Mr. Lopez reportedly launched his hunger strike on Sunday.
Government officials insist that there are no political prisoners in Venezuela. Human rights groups and judicial watchdog organizations, however, have said that the country’s courts have been cowed by his ruling Socialist party.
“The people, we are all out here because we are angry, angrier than last year,” said Miguel Lares, a 60-year-old civil engineer. “We want freedom for political prisoners, and we want an end to the dictatorship of this government.”
A call seeking comment from government officials was not returned.
In the capital city, thousands of protesters dressed in white chanted and carried signs as they marched through an opposition neighborhood in eastern Caracas before gathering for a rally. Organizers of the march called for the white attire to symbolize peace.
“This government is going to fall, it’s going to fall, this government is going to fall!” crowds of protesters chanted as they filled the streets.
“We have a humanitarian crisis here in Venezuela,” former congresswoman Maria Corina Machado said at the rally. “Venezuelans are demanding reforms that Maduro won’t or can’t install.”
While the marches Saturday had the backing of high-profile leaders, such as Ms. Machado, the country’s largest coalition of opposition political parties, the Democratic Unity Roundtable, distanced itself from the event, underscoring the divided nature of Venezuela’s political opposition.
Last year, opposition leaders seeking to make gains at the ballot box were at odds with more militant government opponents, such as Mr. Lopez, who supported the nationwide protests last year. Some opposition leaders believed the marches gave the government an excuse to crack down and tighten its grip on power.
“The other political parties said they were not coming out today, but look how many people are out here,” said Rafael Guerra, a 72-year-old retired travel agent. “This doesn’t even include all the people who stayed home, scared of potential violence.”
In February 2014, demonstrations in the western border city of San Cristobal swept across the country, with protesters venting anger against the oil-rich but cash-strapped country’s failing economy and rampant crime. More than 3,700 protesters were detained in connection with the marches that lasted for weeks. Most have since been released.
Mr. Lopez announced his hunger strike a week ago in a video recording smuggled out of prison and distributed by Popular Will, the political party he founded. Mr. Lopez, a popular former mayor and past presidential candidate, called for the Saturday marches and the end of government “censorship and repression” as well as the release of political prisoners and the scheduling of congressional elections.
He was joined in the hunger strike by Daniel Ceballos, who was stripped of his office as San Cristobal mayor and imprisoned last year for backing the protests and allegedly calling for violence. He has denied the charges.
“I am willing to give my life for the man I love,” Patricia Ceballos said to cheering protesters Saturday. She replaced her husband as San Cristobal mayor after his arrest. “It hurts so much that he has been kidnapped by this oppressive regime!” On Saturday, rally organizers said 11 student protesters had also joined the hunger strike.
Government officials, including the head of the electoral board, have assured that legislative elections will take place this year, after October.
But opponents of the leftist government, which has grown increasingly unpopular as the economy worsens, are concerned that the vote will be canceled to keep the ruling party in control of the unicameral parliament.
“It’s a crucial election because it’s our chance to grab back the congress,” said Marianne Castillo, a 51-year-old homemaker. “But we need international observers because if no one is watching, the government will steal the election.”
Venezuela’s central bank has stopped releasing its consumer price index, but many economists estimate that Venezuela’s inflation rate could reach well over 200% in 2015.
Years of restrictive currency controls and high government spending have drained the government’s international reserves leading to shortages of basic goods in the heavily import-dependent country. Mr. Maduro, who won a contested vote in 2013 to replace his late mentor Hugo Chavez, has seen his approval ratings tumble to record lows in recent months.
He has blamed the country’s economic woes on an international conspiracy allegedly headed by opposition leaders, such as Mr. Lopez, and backed by ideological enemies in Washington. In February, the embattled leader renewed a crackdown on his political foes and arrested the opposition mayor of Caracas, Antonio Ledezma, for allegedly conspiring against the government. Mr. Ledezma, who like Mr. Lopez has been a longtime critic of the government, has denied the charges.  The Wall Street Journal

Disabled Canadian woman went to Cuba on vacation and had the “trip from hell”

An article in The Toronto Sun:

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Rose Finlay’s worst nightmare took flight on a Cuban vacation this week.
The 25-year-old mother of two is still awaiting her $7,000 custom wheelchair to arrive home from Varadero, after a long ordeal travelling with Sunwing, the airline which she claims repeatedly mistreated her.
“It was the most humiliating experience I’ve ever had,” Finlay said at her Bowmanville home Friday evening. “There were three planeloads of Canadians just watching me break down and cry.”
She took to social media and wrote about “the trip from hell” in a Facebook post, which has been shared over 32,000 times since it was posted Thursday.
Finlay and her husband, 32-year-old Brandon, booked a week-long vacation to Cuba without their kids to celebrate their first wedding anniversary, leaving May 20.
Diagnosed with a spinal cord injury at 16, she relies on her wheelchair and said she provided a detailed list of medical supplies and specifications of her chair.
When the plane landed in Varadero, Finlay said she was told by airline staff they couldn’t provide her with her custom chair at the door of the plane, but that it would come out on the carousel with the rest of the baggage. She said in usual circumstances, her wheelchair would be tagged and after she was shown to her seat, it would be the last thing to go on the plane.
“That way, when you get off the plane, your chair is there and you’re not any longer without the supports that are necessary,” she said. “But in Cuba, that wasn’t the case. They said it’ll come out with the baggage and here’s a rickety old chair, hop in. My husband placed me in it and I was completely crooked and I was pushed out to the baggage carousel with all the Canadians waiting, just watching.”
Her wheelchair came out “dead last,” Finlay said.
Because of an uncomfortable mattress, Finlay developed a pressure sore on her buttocks and requested the onsite Sunwing representative to relocate the couple to another resort. Upon arriving at the second resort, the pain continued and Finlay said she couldn’t find a Sunwing person to speak to about going home early.
And then, she got an e-mail stating that her return flight Thursday had been changed from a direct flight back to Toronto to one with a stopover in Manzanillo, Mexico, extending the trip by two hours. But when a representative was reached by phone, they offered no explanation and refused to put Finlay in touch with a manager.
The couple arrived at the airport three hours early.
“The longer I’m out of my custom wheelchair, the more risk I put myself for pressure sores and different things that can happen to my body,” Finlay said. “The Cuban airport is a very intimidating place, you don’t want to look like you’re stepping out of line. The check-in person told me to step out of my wheelchair because they have to check that too, and I said, ‘There’s not a chance in hell you’re going to get me out of my chair. What if I get it back and it’s a crushed tin can?’ I started to bawl.”
A Sunwing representative allegedly refused to give Finlay an identification tag for her wheelchair unless she was checking it in. The couple said they watched the airport empty out and were the last ones escorted through customs.
“They basically interrogated me like I was a terrorist,” she said. “All because I was fighting for my human rights.”
When Finlay landed in Toronto on Thursday, her wheelchair was nowhere to be seen, despite hearing the aircraft crew confirm three times the item was on board the plane.
In a written statement Friday, Sunwing said it is “currently assisting a customer with the return of her specialized wheelchair that was off-loaded in error” on a flight returning from Varadero and is offering the family a full refund.
“When this issue was brought to our attention, we immediately advised the customer that we would bear the costs of a replacement wheelchair while we worked to recover her own,” said Sunwing Travel Group marketing vice-president Janine Chapman, adding that the company launched an investigation. “During the course of this investigation it has become apparent that inter-departmental miscommunications have meant that our usual high standards of customer care were not observed.”
Arrangements are being made to have Finlay’s wheelchair returned on Saturday before noon, Chapman said.
Finlay said she hopes she sees her wheelchair intact, delivered at her doorstep. But until then, she has to rely on her husband “to be my legs.”
She said she will never go back to Cuba or fly Sunwing again.
“If I was given a free vacation to Cuba, I wouldn’t even give it to my worst enemy,” Finlay said. “Especially someone who is disabled.”

Is this what they mean by people-to-people Cuba school trips?

From an article in The Daily News:

Who needs the three Rs?

cubatrip
Two seniors from scandal-scarred Poly Prep shared a hooker, booze and cigars on a school-financed “rite of passage” Cuban getaway hosted by a top school official, a stunning new lawsuit charges.
While the 31-page Brooklyn state Supreme Court suit didn’t name the students, one was identified as the son of a famous musician who “became a generous supporter of the school via his charity contests.”
Numerous reports have cited the charity concerts given for Poly Prep Country Day School by rocker Jon Bon Jovi, whose son Jesse Bongiovi graduated from Poly Prep two years ago.
A spokesman for the Garden State singer-songwriter declined to address the wild allegations in the lawsuit or confirm that the musician’s son was on the trip.
“We never comment on Jon’s family,” said Jon Bon Jovi’s publicist, Ken Sunshine.
The suit filed Thursday by Lisa Della Pietra also alleged the debauchery in Cuba was covered up by the school “to protect a ‘high profile’ celebrity parent of a student who attended the Cuba trip.”
She’s seeking damages from Poly Prep for retaliating against her for blowing the whistle and for alleged bullying by the school’s development director Steven Andersen — identified as the host of the Cuba trip which she learned about in the summer of 2013.
Andersen’s son Sebastian was the second youth on the trip, a source told the Daily News.

Bongiovi and Sebastian Andersen are close friends, with Jesse tagging Andersen in a 2012 Facebook post with the word “Cuba” and a map of the island nation.
In December 2012, Sebastian posted a gorgeous photo of the Caribbean with the caption “that view from the penthouse in Cuba.”
According to the lawsuit, the elder Andersen “paid a prostitute to entertain the students as a ‘rite of passage,’ and drank alcohol to excess and smoked Cuban cigars with them.”
When a Poly alum threatened to expose Andersen’s salacious behavior, the development director paid hush money taken from the school coffers to insure the man’s silence, the lawsuit charged.
School parents learned about the raunchy Cuban getaway after the two students bragged about their boozing and sexual exploits upon returning to Brooklyn, the lawsuit charged.
Calls to Poly Prep headmaster David Harman for comment were not returned, but the school later sent a letter to its alumni denouncing Della Pietra as a “disgruntled employee.”
“We believe her claims are without merit and lack any substantive legal foundation,” said the letter, signed by Harmon and Board of Trustees chairman Scott Smith. “Poly Prep intends to defend itself vigorously.”
Della Pietra, a 1986 graduate of Poly Prep, returned to handle fund-raising for the elite Brooklyn school.

The lawsuit said her tormentor Andersen received a $341,117 salary, along with perks that included a house on campus, a car and free tuition for his two children.
The true purpose of his Cuban adventure was to scope out an investment that Andersen hoped would become his “nest egg,” Della Pietra charged in her court filing.
The school conducted nothing but a “sham” investigation once Della Pietra made her charges, the suit claimed.
School officials, despite promises to protect her, told Andersen about her whistleblowing — and he allegedly struck back.
Andersen “began a campaign of retaliation and bullying . . . including verbal rants and threats, stripping plaintiff of her job responsibilities,” the suit said.
In December 2012, Poly Prep Country Day School settled a landmark lawsuit claiming its longtime football coach sexually abused hundreds of boys over a 25-year period — with officials covering up the abuse.
The explosive 2009 suit claimed school officials knew coach Phil Foglietta was a sexual predator, but ignored repeated complaints to protect the institution’s athletic reputation and fund-raising efforts.
In her lawsuit, Pietra noted that Andersen coached football alongside Foglietta for 20 years. The suit does not allege sexual misconduct by Andersen.    The Daily News

As expected: Obama takes Cuba off list of state sponsors of terrorism

The United States has taken Cuba off the list of state sponsors of terrorism, a step that authorities in Havana had insisted upon in advance of the reopening of embassies.
U.S. Secretary of State John F. Kerry signed the order Friday, 45 days after the Obama administration informed Congress that it would remove Cuba from the list. The State Department determined Cuba had not supported international terrorism in the previous six months, a requirement for getting off the list that now holds only three names — Iran, Syria and Sudan. Cuba had been on it since 1982.
“While the United States has significant concerns and disagreements with a wide range of Cuba’s policies and actions, these fall outside the criteria relevant to the rescission of a State Sponsor of Terrorism designation,” said Jeff Rathke, a spokesman for the State Department.
Removing the terror designation lifts some trade barriers against Cuba, but an overall embargo remains in effect and requires a congressional vote to reverse it. President Obama has said he hopes to work with Congress to get the embargo lifted.
Until then, the action taken Friday will not provide a huge economic boost. It could, however, encourage some international companies and banks to do business in Cuba, as they will no longer fear running afoul of U.S. laws.
Obama and Cuban President Raúl Castro announced a historic decision to renew relations last December, and since then representatives of the two countries have met four times to iron out issues that would allow them to reestablish diplomatic relations, open full-fledged embassies and exchange ambassadors
Both countries closed their embassies in 1961, but each has maintained pared-down interests sections in the other’s capital.
It is not clear how much longer it will taken before the embassies re-open. Last week, Cuban and U.S. officials said they still needed to settle some other issues. Washington has been particularly concerned that its diplomats have the ability to travel throughout Cuba and meet with Cubans without fear they will be harassed for speaking with Americans.
The removal of Cuba from the terrorism list addresses one of Havana’s key demands. Though it used to support left-wing insurgencies in other countries, it viewed the designation as an affront.
This month a small bank in Florida agreed, at the request of the State Department, to allow the Cuban interests section in Washington to open an account. That means it no longer has to pay its bills in cash.

The Washington Post

The Mystery of Venezuela’s Missing Coins

From an article in Forbes:

bolivarcoin

I wrote a couple of days ago about how some part of Venezuela’s coinage is now worth more as scrap metal than it is as money. To the point that you’d probably do better by going and getting change from a bank rather than robbing it. All of which has led to some interesting follow ons.
This is entirely normal in places with high inflation rates. I’ve seen it happen before in Russia for example. As coins become worth nothing, in the sense that they cannot in fact purchase anything, people simply stop using them.
However, there’s another part to this: where are all those coins going? There’s two possible assumptions: the first is just that they’re in change jars all over the country. That is a possibility. The other is that they’re being trucked over the border or something to a place where people can get the metals value rather than the currency value. For, as I showed (without too much accuracy but it’s a good enough number) the one bolivar coins are now worth about $7,000 US dollars a tonne as scrap metal and $300 dollars a tonne as one bolivar coins. That’s the sort of arbitrage opportunity that people do indeed take advantage of: again, something I saw in Russia decades back.
But here’s where it starts to get weird. A lovely little piece of digging by Steven Bodzin tells us that the Venezuelan mint is still producing these one bolivar coins. The evidence isn’t conclusive to be sure, but the mint is recording that the number of one bolivar coins in circulation went up by 8 million or so in one recent month.
Just to do the math here: there’s 125,000 one bolivar coins to a tonne, so 8 million coins is 64 tonnes of coins. But given our rough metals value (and again, is is a rough value) of $7,000 a tonne then that’s half a million dollars worth of metal that has been turned into coins. Those coins having a value of perhaps $20,000. Or, if you prefer, that’s a net loss to the mint of $480,000 from making coins. Or, in the more technical jargon, that’s reverse seigniorage.
We should note by the way that it’s not uncommon for very small coins to cost more to manufacture than they are worth. A US penny costs more than one penny to make. But that’s a rather different calculation. That’s including all of the costs of manufacturing and distribution. The metals value of one US cent is very much less than one US cent. Here, in the Venezuelan example, the metals value of one bolivar is very much higher than one bolivar.
But this then gives us something of a mystery. If those one bolivar coins are being produced then they must be going somewhere. But where? They don’t seem to be going onto the streets as no one is using them. Bodzin speculates that they might never actually go into circulation:
“Hannah then asks, again on Twitter, where they all went. My guess, as I mentioned a couple years ago, is that they get sold for scrap metal, most likely before ever leaving the mint.
Could be. They might all be languishing in bank vaults, in those change jars even. I am not trying to decide here between those theories: rather, just to outline what would be very interesting to know. If no one in Venezuela is using one bolivar coins and the mint is continuing to make them, well, where are they going?
And the larger point is of course that isn’t it a marvel that a government can screw up so badly that they actually lose money on making money? The public policy lesson of which is whatever it is that you want to do to make the poor better off, a noble goal in itself, we should be using Venezuela as an example of what not to do, a guide to things that don’t work, not as some here in Europe (Syriza and Podemos come to mind) think, as examples to be followed.

Obama visited the Ermita de la Caridad

After everything he has done to support the Cuban dictatorship, President Obama went to visit the shrine to Cuba’s patron saint on Thursday.

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According to the White House, Obama wanted to “pay his respects to the Cuban-American diaspora that worship there,” according to a White House statement. “He will honor the sacrifices that Cuban-Americans have made in their pursuit of liberty and opportunity, as well as their extraordinary contributions to our country.”

After the brief visit, Obama went back to Washington to continue giving the Castro brothers everything they need in order to continue in power exploiting and enslaving 11 million Cubans.

Cuba detains Tania Bruguera with Havana Biennial in full swing. How will the art world react?

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Watch a video of the arrest: Click here

The latest edition of the Havana Biennial kicked off Friday, but the Cuban artist everyone is talking about does not have a piece in the show.
Tania Bruguera was once again detained by the authorities on Sunday afternoon after staging a performance at her Havana home, in which she and others read passages from Hannah Arendt’s “The Origins of Totalitarianism.” A video by the civil rights group Patriotic Union of Cuba, embedded in this post, records the moment in which state security agents approach her on the street.
All of it raises questions about Bruguera’s continuing legal limbo. The artist is a Cuban national, but as an internationally recognized artist, she spends much of her time teaching and staging her work abroad. She returned to Cuba in December and was first detained just before New Year’s Eve for attempting to stage a performance about freedom of expression in Havana’s iconic Revolution Square.
The Cuban government hasn’t formally filed any charges against her, but Bruguera had her passport confiscated, and it has yet to be returned. For the time being, she is unable to leave Cuba.
But artist Paul Ramirez Jonas says it’s not too late for the curators and artists who are in Havana to do something. In a Facebook status update he called on the international art community members present in Cuba to take action: “If you are in Havana please don’t act like it is business as usual — because it isn’t. Ask every government official, curator, and (why not) the artists, as well, about Tania.”
“Many of us who chose not to participate in the Biennial or related shows have done what we could from the outside,” he adds. “If you are in Cuba now is your chance to do something.”
Bruguera couldn’t be reached for comment. But in a taped interview with the a reporter from the Cuban news website Martí shortly after she was released, she sounds firm in her mission to make art that touches a nerve — whether it’s in Cuba or anywhere else.
“When they were going to take me, I turned around to everyone who was there and said, ‘Don’t shout,'” she says. “Nothing. Don’t do anything. This is nonviolent.”

Los Angeles Times